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Tesla: A $1.33 Billion Pile of ... What?

Investors are hot for shares of Tesla Motors. But what are they buying?

If you've been waiting to buy Tesla Motors(Nasdaq: TSLA), your chance has arrived: The California electric-car maker went public on Tuesday at an initial share price of $17 -- considerably above the expected $14 to $16 -- and opened higher still, hitting $21 during the day's trading.

Tesla's offering, the first by an American carmaker since Ford's (NYSE: F) in 1956, netted Tesla some $202 million in much-needed proceeds. Add in an additional $50 million from Toyota(NYSE: TM), arriving momentarily via a post-IPO private placement, and it's clear that the cash-hungry automaker has acquired a sizable nest egg.

Tesla hasn't been coy about what it plans to do with the money. It'll fund the development and production of the Model S, a four-door sedan that is the company's first attempt at a mainstream, mass-market model -- one that will hopefully lead the money-losing firm to profitability.

At $17 per share, Tesla -- which was reportedly close to bankruptcy not long ago -- is valued at about $1.33 billion. That's a lot of money. But what do those new shareholders really own?

The next Amazon? Or the next Pets.com?Let's stipulate this right up front: As things look now, electric cars are (probably) the future of the automobile. After a couple of decades of dithering around with fuel cells, hydrogen-powered internal combustion, and other approaches to a low-carbon, low-oil future, most of the auto industry's heavy hitters have focused on cars with electric drivetrains powered by lithium-ion batteries, with or without ancillary gasoline engines. Investor excitement around electric cars generally is probably deserved.

But that was true -- generally -- of investor excitement around the Internet in 1998. So here's the question: Is Tesla the future of electric cars?

Groundbreaking technology ... but the ground has already been brokenTesla's first model, the much-hyped (with some justification) Roadster sports car, was an impressive product -- the first really nice, usable, fun electric car. But technologically, it's nothing special, at least when viewed from a 2010 vantage point. It's essentially a whole bunch of laptop computer batteries (6,831 to be precise), an electric motor, and a special single-speed transmission built by BorgWarner(NYSE: BWA), cobbled together and stuffed into a substantially reworked Lotus Elise.

Now, that's not a bad thing. The Roadster is a well-finished car that's exceedingly fun to drive, has decent range, and is backed by kid-glove customer service. But technology -- and the auto industry -- have moved on a long way since the Roadster was unveiled in 2006. Heavy-hitter auto suppliers like Johnson Controls(NYSE: JCI) and Magna International(NYSE: MGA) have made enormous investments in electric-car technology, developing special large-format lithium-ion batteries specifically for automotive use that are expected to be in mass production in the very near future. Even tech giants like Microsoft(Nasdaq: MSFT) have waded in; Mister Softy is working with Ford on systems to manage recharging of the automaker's upcoming electric models.

And now come the heavy hittersMore to the point, Nissan and Ford are expected to launch mainstream all-electric models by early next year. These cars, which will be bristling with advanced technologies, will sport familiar badges and mass-market price tags (under $30,000 after tax breaks), and they'll be sold and serviced via extensive dealer networks that are already familiar to consumers. Toyota, General Motors, and others are expected to follow with all-electric models and advanced "plug-in" hybrids like the Chevy Volt and upcoming plug-in Toyota Prius.

Contrast that with the Model S, which will be considerably more expensive (about $50,000 after tax breaks) while using technology similar to the Roadster's. Tesla has already announced that the Model S will feature laptop-type battery cells from Panasonic. But unlike the Roadster, which is largely built by outside suppliers, the Model S will be built by Tesla itself, a company with zero experience in ground-up mass production of cars, notwithstanding possible help from Toyota.

The daunting road to successTesla says that it needs to sell 20,000 Model S autos a year to make this thing work. But the Model S and Tesla -- a start-up that has yet to book a profitable quarter, and that has sold about a thousand cars ever -- are going up against companies with vast R&D resources and brands that are global household names. And they're doing it with a significant cost/price disadvantage, no experience in this kind of manufacturing, and with no disruptive new technology. In other words, there's no real first-mover advantage.

How do they win? For that matter, how do they survive? For investors, where's the upside?

I can't come up with a convincing answer to those questions. If you can, buy the stock.